New suitors line up for CIC Energy

MBONGENI MGUNI
Staff Writer | Tuesday October 19, 2010 00:00

In addition, another unnamed Chinese company is reportedly preparing a bid for CIC Energy, due to be unveiled by October 30.

The two bids come as CIC Energy and the 'multi-billion Pula Indian conglomerate' - which has been widely identified as JSW, are bound to an exclusivity period expected to last a number of weeks. Under the agreement, CIC Energy will not solicit, initiate or encourage submission of further offers or participate in negotiations with parties other than JSW.

The Indian conglomerate - whose offer of 7.75 Canadian Dollars (US$7.60/P50) per share is below the latest offers - is presently conducting a comprehensive due diligence on CIC Energy, ahead of a possible binding purchase agreement. Analysts believe the flurry of offers is driven by CIC Energy's lower evaluation as a result of the uncertainty around the Mmamabula Energy Project, as well as positive developments with regards to the long-awaited coal export route through Namibia.

'Last week, Government flighted Expressions of Interest (EOI) for the Trans-Kalahari Railway Line and the dry port at Walvis Bay,' said a local resource sector analyst.

'The railway line is key for coal exports as it could present a more cost-effective route than South Africa. CIC Energy and other private sector players have previously expressed interest in developing the railway line, indicating the line's critical importance for coal exports.

'With the EOI out, it is possible that this has contributed to more entities seeing the value in the Mmamabula coal project, and thus preparing bids for CIC Energy.'

While the governments of Botswana and Namibia as well as the World Bank have been involved in the preliminary stages of the development of the railway line, the US$1.4 billion (P9.8) billion project will be funded and developed mainly by private sector players.

However, the latest bidders' efforts could come to nought should JSW and CIC Energy reach agreement which, if it comes, will be early next year. The Indian conglomerate is eager to lay its hold on the 2.6 billion tonnes of coal currently under CIC Energy's prospecting licences.

Mmamabula's high calorific value coal could support an operation pumping up to 20 million tonnes of the energy mineral annually. Whichever suitor wins a stake in or control of Mmamabula will have a guaranteed market as both India and China are high coal users.